Updated 3/11/2025
NewMarket Corporation (NYSE: NEU) isn’t a household name, but it plays a crucial role in the specialty chemicals industry. The company specializes in petroleum additives, an essential component in refining and fuel production. While it may not be the flashiest stock out there, its strong profitability and consistent dividend payments make it worth a closer look for income investors.
For those focused on dividends, NewMarket has a lot to offer. It maintains a steady yield, keeps its payout ratio low, and generates strong cash flow year after year. However, the stock isn’t without its challenges, including a somewhat high valuation and ties to the oil and gas sector. Let’s break down what makes this company an interesting option for dividend-focused investors.
Key Dividend Metrics
📌 Dividend Yield: 2.00%
💰 Annual Dividend Payout: $11.00 per share
📈 5-Year Average Dividend Yield: 2.11%
🛡 Payout Ratio: 20.74% (Very Conservative)
📅 Next Dividend Date: April 1, 2025
⏳ Ex-Dividend Date: March 17, 2025
Dividend Overview
NewMarket takes a steady approach to dividends rather than aiming for high yields. At 2.00%, the yield isn’t going to turn heads, but it’s well-supported by the company’s financials. Investors looking for reliable income will appreciate that the dividend is backed by strong earnings and cash flow.
One of the most reassuring aspects of NewMarket’s dividend is its low payout ratio of just 20.74%. This means the company only distributes a small portion of its earnings to shareholders, leaving plenty of room for reinvestment and future growth. In contrast, many industrial and chemical companies operate with payout ratios closer to 50%.
The company has also been inching up its dividend, with the latest increase bringing the annual payout to $11.00 per share. That’s a step up from last year’s $10.00 per share, showing management’s confidence in the company’s financial strength.
Dividend Growth and Safety
NewMarket isn’t an aggressive dividend grower, but it has a strong track record of raising payouts over time. The company’s five-year average dividend yield of 2.11% suggests a slow but steady increase in payments.
More importantly, the dividend appears extremely safe. With operating cash flow at $519.59 million and free cash flow at $406.95 million, there’s no concern about the company’s ability to cover its payouts. A payout ratio below 25% is a strong indicator that the company isn’t stretching itself too thin.
Another reassuring factor is the stock’s low volatility. With a beta of just 0.42, NewMarket tends to be much less volatile than the broader market. That’s great news for income investors who prefer a stable stock price rather than wild swings.
Chart Analysis
Price Action and Moving Averages
The price movement for NewMarket Corporation (NEU) over the past year has been somewhat choppy, with periods of sideways action followed by a recent breakout. The stock had been struggling below its 50-day and 200-day moving averages for several months, which signaled a prolonged downtrend. However, a notable shift occurred in early 2025 when the price pushed above both moving averages, suggesting potential momentum to the upside.
Right now, the price is hovering just above the 200-day moving average, which sits around the $535-$540 range. This level had previously acted as resistance, but with the recent push higher, it may now be turning into a new support level. The 50-day moving average is starting to slope upward as well, indicating short-term strength in the stock.
Volume and Buying Interest
Volume has been relatively stable, though there were a few spikes, particularly in October and February. The October volume surge coincided with a sharp drop in price, likely due to a significant selling event. On the other hand, February’s volume increase accompanied a strong move upward, which hints at renewed investor interest.
Over the past few weeks, volume has been steady but not overly aggressive. This suggests that while the stock has moved higher, the rally has not been fueled by a major influx of buyers. For sustained upside, it would be ideal to see volume increase alongside rising prices.
RSI and Momentum
The Relative Strength Index (RSI) has been climbing since late December, which aligns with the price recovery. It has now entered the higher end of the neutral zone, hovering near the 70 level. This typically suggests that the stock is gaining strength but could also be nearing overbought conditions.
If the RSI pushes above 70, it might indicate that the stock is running a little hot and could be due for a pullback. However, as long as it remains above the midline (50), momentum remains in favor of the bulls.
Recent Candle Behavior
Looking at the last five trading sessions, the candles show a mix of indecision and strength. There have been some longer upper wicks, indicating that sellers have stepped in when the price moves higher. At the same time, the lower wicks suggest that buyers are defending key levels.
The most recent daily candle closed near its opening price after testing both the highs and lows of the session. This suggests some hesitation in the market, possibly as traders wait to see if the breakout above the moving averages will hold. If the stock can maintain levels above $550 in the coming days, it would strengthen the case for further upside.
Analyst Ratings
📊 Upgrades:
🔹 KeyBanc Capital Markets ⬆️ – A recent upgrade from KeyBanc Capital Markets moved NewMarket Corporation (NEU) to a buy rating. The analyst pointed to the company’s strong financial performance and stable business model as key reasons for the shift. However, despite the improved outlook, earnings estimates were adjusted slightly downward due to rising operating costs and foreign exchange fluctuations. While long-term fundamentals remain solid, there may be short-term cost pressures affecting profitability.
📉 Downgrades:
🔹 StockNews.com ⬇️ – In contrast, StockNews.com revised its rating for NewMarket, downgrading it from a strong buy to a buy. This signals a slightly more cautious stance while still maintaining a positive view of the stock. The downgrade may reflect concerns over broader market conditions or sector-specific challenges that could affect revenue growth in the near term. While the company remains fundamentally strong, this adjustment suggests analysts are reassessing short-term expectations.
🎯 Consensus Price Target:
💰 The consensus price target among analysts for NewMarket is $450.00. This estimate reflects a balanced perspective, considering both long-term stability and near-term cost pressures that could influence earnings growth.
These recent rating changes highlight a mixed sentiment toward NewMarket. Analysts recognize its strengths, but factors such as increasing costs and broader industry trends have led to a more tempered outlook.
Earnings Report Summary
NewMarket Corporation closed out 2024 with a strong financial performance, showing solid earnings growth despite some shifts in sales. In the fourth quarter, the company posted a net income of $110.7 million, which works out to $11.56 per share. That’s a noticeable jump from the same period last year when net income was $80.4 million, or $8.38 per share. For the full year, earnings came in at $462.4 million, translating to $48.22 per share, up from $388.9 million and $40.44 per share in 2023.
One of the key areas to watch with NewMarket is its petroleum additives segment, which continues to be the backbone of the business. Sales in this category for the fourth quarter landed at $626.1 million, slightly lower than the $642.0 million seen in the same quarter last year. Even with the dip in sales, operating profit for the segment rose to $135.7 million, up from $110.4 million. This boost came largely from lower operating costs, as the company has been working hard to streamline expenses. That said, lower shipment volumes, as customers adjusted their year-end inventories, kept the numbers from being even better.
Looking at the full year, petroleum additives sales totaled $2.6 billion, a bit lower than the $2.7 billion reported in 2023. Despite that, operating profit jumped to $591.9 million, compared to $514.4 million the year before. The main driver behind this was a focus on cost-cutting and lower raw material expenses, even though selling prices saw some pressure. Shipment volumes were mostly steady, with a small uptick in lubricant additives offsetting a slight decline in fuel additives.
A major development for NewMarket in 2024 was its acquisition of American Pacific Corporation (AMPAC), which closed on January 16. This new specialty materials segment contributed $141.2 million in sales for the year, which actually exceeded initial expectations. The operating profit for AMPAC came in at $17.5 million. Some of this was impacted by the sale of inventory acquired at the time of purchase, which was sold at fair value, meaning there wasn’t any margin added.
Cash flow remained strong throughout the year, which allowed NewMarket to return value to shareholders while also reinvesting in the business. The company paid out $95.9 million in dividends, spent $57.3 million on capital improvements, and repurchased $31.9 million worth of stock. On top of that, since completing the AMPAC acquisition, the company has already paid down $373 million in debt, showing a clear commitment to keeping its balance sheet strong.
Overall, the numbers from 2024 highlight NewMarket’s ability to stay profitable even as market conditions fluctuate. With smart cost management and a successful acquisition under its belt, the company is setting itself up for continued stability and long-term growth.
Financial Health and Stability
A company can only maintain strong dividends if it has a solid financial foundation. NewMarket checks the right boxes here.
- Profit margin: 16.59% – Healthy margins for its industry, suggesting strong pricing power.
- Operating margin: 22.04% – Shows efficiency in managing costs and maintaining profitability.
- Return on equity (ROE): 36.43% – A strong indicator of how well the company generates profits from shareholder capital.
- Current ratio: 2.75 – Plenty of short-term assets to cover liabilities.
- Debt-to-equity ratio: 72.66% – A bit on the high side but manageable given strong cash flow.
While the company does carry over $1 billion in debt, its ability to generate substantial free cash flow makes this less of a concern. Given its high profit margins and steady revenue stream, NewMarket has the financial strength to handle its obligations without putting its dividend at risk.
Valuation and Stock Performance
NewMarket is not a cheap stock, but it’s also not overpriced considering its financial health.
- Price-to-earnings (P/E) ratio: 11.41 – Reasonable for a profitable, high-margin business.
- Enterprise value/EBITDA: 8.20 – A fair valuation given its cash flow and earnings.
- Price-to-book ratio: 3.59 – Slightly elevated but in line with other high-ROE companies.
The stock has been trading between $480.00 and $638.21 over the past year, with its 50-day moving average at $523.48 and its 200-day moving average at $535.84. With shares currently at around $550.13, the stock sits near its long-term trend.
For long-term investors, this suggests a fairly stable valuation. It’s not a bargain-basement stock, but given its profitability and strong margins, it isn’t wildly overvalued either.
Risks and Considerations
NewMarket is a solid dividend stock, but no investment is without risks.
- Slower growth – The petroleum additives market isn’t a fast-growing sector. While stable, it doesn’t offer the explosive expansion potential of some other industries.
- Industry dependence – Since NewMarket’s business is tied to oil and gas, any downturns in energy markets could have an impact on demand for its products.
- Debt levels – While the company has strong cash flow, carrying $1.06 billion in debt means interest costs could become a concern if economic conditions worsen.
- Limited trading volume – With an average of just 41.67k shares traded daily, it’s not the most liquid stock. This could make it harder for large investors to buy or sell shares without affecting the price.
Final Thoughts
NewMarket may not be the most well-known dividend stock, but it has all the hallmarks of a reliable income investment. With a solid 2.00% yield, a highly conservative payout ratio, and strong financials, it offers a level of stability that many dividend investors seek.
While the stock isn’t cheap, it remains fairly valued given its profitability and cash flow. It’s an excellent choice for investors who prefer steady, well-funded dividends over high-yield speculation. The company’s focus on petroleum additives means its growth may be limited, but for those seeking dependable income with minimal risk, NewMarket is worth considering.
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